Alternative Opportunities for Insurers | Q2 Update

In our Q2 2024 edition of Alternative Opportunities, we continue to cover views on a variety of private asset classes from Invesco Solutions and our partner firms. Within this piece, we’ll present a framework for analyzing across alternative markets to help inform insurers’ investment decisions.

Private credit

We continue to believe the current environment will lead to improved deal activity even in light of significant capital being allocated to the space. As such, insurers who have ramped up their private credit allocations in recent years should consider staying the course. Our anticipation of an improved opportunity set within distressed and special situations debt means insurers may see more opportunities in their private credit bucket, which enhances capital-efficiency. Commercial real estate debt is anticipated to remain highly attractive in both economic and capital-adjusted terms as well.

Private equity

Broadly speaking, we encourage insurance clients to be selective in their private equity allocations in the current environment. Strategies that rely heavily on leverage may struggle to deliver strong risk-adjusted returns in the current interest rate environment.

Real assets

Given our upgraded view from underweight to neutral, now may be an opportune time to reconsider private real estate allocations. While the asset class remains challenged, we believe we are close to the bottom for valuations. As long-term investors, insurers allocating to the space now may benefit from attractive opportunities, particularly in light of a moderating interest rate backdrop.

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